August 21, 2007
If you're like most retired people, the single largest asset you have is your home. Since it may be paid for or possibly subject to a small home equity loan, there is significant equity there that could be used for living expenses, including luxuries such as vacations or a new car, or for necessities, such as a new roof, medical expenses, etc.
Another reason people find reverse mortgages helpful is to pay for in-home care instead of becoming institutionalized. Most individuals prefer to remain at home if they have the choice and the funds to do so. A reverse mortgage can make this happen for people who are "land rich and cash poor" because most of their money is tied up in their home. Rather than selling their home, and looking for a new place to live, it is more convenient and appealing to withdraw equity out of their house.
When most people purchase a home they take out a mortgage rather than using their own funds. Their bank loans them money, and the monthly payments of principal and interest are paid back monthly until the loan is paid in full and discharged. Most home equity loan and standard mortgages require that the loan be repaid over a number of years. With a reverse mortgage, the loan does not have to be repaid under most circumstances.
The bank providing the funds for a reverse mortgage bases the amount on...
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by: Hyman G. Darling, Esq.